BRINDERSON-NEWBERG J. VENTURE v. Pacific Erectors

• Decision Date: 19 July 1988
• Docket Number: CV-88-1282-PAR.,No. CV87-7448-PAR,CV87-7448-PAR
• Citation: 690 F. Supp. 891
• Court: U.S. District Court — Central District of California
• Parties: BRINDERSON-NEWBERG JOINT VENTURE, et al., Plaintiffs, v. PACIFIC ERECTORS, INC., et al., Defendants. And Related Actions.

690 F. Supp. 891

BRINDERSON-NEWBERG JOINT VENTURE, et al., Plaintiffs, v. PACIFIC ERECTORS, INC., et al., Defendants And Related Actions.

Nos. CV87-7448-PAR, CV-88-1282-PAR.

United States District Court, C.D. California.

July 19, 1988.

John D. Alkire, Perkins Coie, Seattle, Wash., Stacy Allen, Perkins Coie, Los Angeles, Cal., for plaintiffs.

Arnold R. Hedeen, Ferguson & Burdell, Seattle, Wash., Donald McL. Davidson, Diana M. Dron, Monteleone & McCrory, Universal City, Cal., for defendant Pacific Erectors.

William I. Chertok, Marc B. Chassman, Phillips, Nizer, Benjamin, Krim & Ballon, Los Angeles, Cal., for Hartford Acc. & Indem. Co.

AMENDED MEMORANDUM OF DECISION AND ORDER

RYMER, District Judge.

The parties to this dispute are Pacific Erectors, Inc., and Hartford Accident & Indemnity Company (the "subcontractor") on one side, and Brinderson-Newberg Joint Venture, Brinderson Corporation, Brinderson Constructors, Inc., Gust K. Newberg Corporation, and Frank Loscavio (the "contractor") on the other. The various claims and counter-claims essentially arise from a dispute over the amount of work and type of work that the subcontractor agreed to perform for the contractor in a project for the Navy at the Puget Sound Naval Shipyard in Bremerton, Washington. Subcontractor moves for consolidation of the two actions currently before this court, and also for transfer of these actions to the United States District Court for the Western District of Washington.¹

In the earlier of the two actions (CV 88-1282) subcontractor was plaintiff; it was originally brought in the United States District Court for the Western District of Washington. Subcontractor alleges fraud, negligent misrepresentation, unfair business practice (pursuant to a Washington statute), and violation of the Racketeering Influenced and Corrupt Organizations Act (RICO); jurisdiction is pursuant to diversity and 18 U.S.C. § 1965. The First Amended Complaint names Brinderson Corporation, Brinderson Constructors Inc., and Frank Loscavio as defendants.

The contractor (Brinderson-Newberg Joint Venture, Brinderson Corporation, and Gust K. Newberg, but not Frank Loscavio) brought the other action (CV 87-7448) that is before this court. It alleges breach of contract, breach of the covenant of good faith and fair dealing, and unfair settlement practices; jurisdiction is pursuant to diversity. It names Pacific Erectors, Inc. and the Hartford Accident and Indemnity Company as defendant. Subcontractor in turn brings counterclaims for breach of the covenant of good faith and fair dealing, fraud, and negligent misrepresentation.

The first action was filed on August 28, 1987 in the United States District Court for the Western District of Washington. On January 22, 1988 the Honorable Carolyn Dimmick, United States District Judge, transferred this action to this district. She based her decision on the forum selection clause contained in the contract. It states:

Article 22. Governing law—Except as provided in the General Contract as incorporated herein, this subcontract shall be interpreted and governed substantively and procedurally, including periods for limitations of actions, by the law of the State of California, and the situs of any suit which may be brought by or against Contractor or its surety shall be the County of Orange, State of California. Rotter Decl., Exhibit 1 at 8.

Judge Dimmick held that the subcontractor —plaintiff in this action—was collaterally estopped from denying the validity of this clause by a prior ruling in the Washington state courts.

Her order succinctly summarizes the nature and scope of this prior ruling as follows:

Plaintiff Pacific the subcontractor brought an action in Kitsap County Superior against BNJV and Brinderson Corporation. On October 27, 1987 Judge Kruse of the Kitsap County Superior Court, after briefs and oral arguments were presented, entered an order dismissing the suit without prejudice. Judge Kruse found that the contract was entered into by two sophisticated parties, that California law controlled, that the forum selection clause was not "unfair, unreasonable, unduly oppressive or results in substantial injustice." Trial Transcript at 46. Judge Kruse found that the proper forum for this suit is California.

Rotter Decl., Exhibit 9 at 230 (January 1988 Order at 2).

Subcontractor tried to distinguish the instant action (CV 88-1282) from the state court case by noting that it involved different defendants and different claims. Judge Dimmick concluded that both the parties and the claims in the two suits were essentially the same and granted issue preclusive effect to Judge Kruse's ruling. She also reaffirmed Judge Kruse's ruling that the clause was not part of an adhesion contract and had been open to negotiation.

Thus, the law of the case in these actions establishes the following propositions: 1) California law applies to all the diversity claims; 2) the forum selection clause placing the situs of any suits in Orange County, California is valid and enforceable; 3) the tort claims alleged in the first action (CV 88-1282) ultimately derive from the duties of the parties under the contract. With these propositions established, the court now deals with subcontractor's motions.²

Motion to Transfer

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). In a motion to transfer under § 1404(a) the burden is on defendant to justify the transfer of the case. Los Angeles Memorial Coliseum Comm. v. Nat'l Football League, 89 F.R.D. 497, 499 (C.D.Cal.1981). It is not enough that defendant would prefer another forum or that the claim could have been brought elsewhere. Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3848 (1986). The three factors mentioned in the statute are broad, Id. § 3847, and the decision to transfer is left to the discretion of the trial judge. United States Aluminum Corp. v. Kawneer Co., 694 F.2d 193, 195 (9th Cir. 1982). This decision rests on the facts of each case. Starnes v. McGuire, 512 F.2d 918, 925 (D.C.Cir.1974).

The parties disagree over the impact that the forum-selection clause and Judge Dimmick's transfer to this district should have on the standard analysis. Contractor argues that either one of these interrelated issues dispositively determines that this court is the proper forum for both suits. Subcontractor contends that the requirements of the forum selection clause were satisfied once the actions are pending in this district, and therefore its effect is discharged. Under this view, the court should ignore the clause and the prior ruling in conducting the § 1404(a) analysis.

1. Law of the Case

Once a court has transferred a case, the transferee court will usually accept that decision as the law of the case unless there are "impelling and unusual circumstances" not to do so. United States of America v. Koenig, 290 F.2d 166, 173 n. 11 (5th Cir. 1961) (Wisdom, J.); 1B Moore Federal Practice ¶ 0.4048; Wright, Miller & Cooper, Jurisdiction 2d § 3846 at 360. The main cause for a transferee court to remand the transfer is if it does not have either proper venue for the action or personal jurisdiction over the defendant. Hoffman v. Blaski, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1963). Subcontractor does not assert that either venue or jurisdiction are improper in this district.

Subcontractor does contend that Judge Dimmick's order never reached the § 1404(a) issue and therefore should not affect this court's analysis: "Like Judge Kruse, Judge Dimmick did not decide whether transfer was appropriate under 28 U.S.C. 1404(a).... The forum selection clause is now satisfied; venue has been controlled in the first instance and it is appropriate to consider transfer." Reply at 16-17. According to subcontractor, her order merely enforces the forum selection clause, which in turn merely requires that subcontractor's suit be filed in California. Now that it is here, this court is free to consider the § 1404(a) question without reference to her order. Subcontractor thus distinguishes transfers pursuant to a forum selection clause from other types of transfers that presumptively become the law of the case.³

Subcontractor cites no authority that ignores a forum selection clause in a § 1404(a) analysis. No case adopts plaintiff's position that the clause merely determines where the action must originally be brought rather than where it should remain. Common sense is also against subcontractor's view: when parties negotiate for a forum-selection clause their purpose obviously is to nail down where the action will be tried, not where it is initially filed. Accordingly, Judge Dimmick's transfer, under either § 1404(a) or § 1406(b), pursuant to Article 22 of the parties' contract, determines where this action should be maintained. Contrary to subcontractor's assertion, it therefore has had its day in court on its § 1404(a) arguments.

Sound considerations of judicial economy support this interpretation as well. Many commentators have noted that the limited equity which § 1404(a) may dispense is often bought at a heavy price in both delay in reaching the merits of the case and in diversion of scarce judicial resources. See, e.g., Wright, Miller & Cooper, Jurisdiction 2d § 3841 n. 6. Accordingly transfers pursuant to a forum-selection clause the strong presumption of validity given other transfers lessens the possibility of interminable wrangles over this issue. It also lessens the possibility of an unseemly "ping-pong" game of re-transferring between the district courts that ultimately an appellate court must resolve. Cf., Hoffman v. Blaski, 363 U.S. at 348, 80 S.Ct. at 1092 (Frankfurter, J. dissenting) (stating that federal courts should avoid practices that forestall a final decision on pre-trial matters; the...